13-09-2007: Proton’s unit wants to be major parts supplier to Toyota

SHAH ALAM: Miyazu (Malaysia) Sdn Bhd, a unit of Proton Holdings Bhd, wants to be a key stamping dies and parts supplier for Toyota Auto Body Malaysia (TABM) and Toyota Group globally from its newly-set up plant in Shah Alam, Selangor.

The company has secured a RM4 million contract from TABM to supply car chassis for the next three years. The contract is expected to account for 80% of its production capacity.

Miyazu said its 35,700-square metre complex is one of the largest and most modern stamping facility in the country.

At the handing over of the first blanking sheet to TABM yesterday, Proton’s manufacturing director Datuk Kamarulzaman Darus said the contract would see the company supplying 29 auto parts to TABM, which would be delivered four times daily on the basis of pull system in compliance with TABM’s production cycle.

The system is expected to increase Miyazu’s overall equipment effectiveness (OEE) by 15%.

“This is a manifestation of capabilities of local engineers and workers in adopting to a vast degree of client requirements, in this case our ability to meet with Toyota standards, known for having one of the highest standards globally,” said Kamarulzaman.

“This new relationship will also see Miyazu and TABM’s engineers collaborating to implement quality and process control improvement, adopting the Toyota Production System, pull system, total productive maintenance, of which are key pillars to an efficient delivery and cost control system,” he said.

Kamarulzaman added that the cooperation with TABM would benefit Proton, as it would contribute towards the group’s overall revenue as well as providing Proton and Miyazu’s employees an opportunity to enhance and upgrade their capabilities.

To meet TABM’s “zero scratch” and “zero dust” requirements, Miyazu had to tweak its existing system to achieve consistent standards in their blanking sheets process and delivery.

Miyazu chief operating officer Amrizal Abdul Majid said the company planned to implement the stamping production line in its Tanjung Malim plant in the next fiscal year after monitoring the performance of its Shah Alam facility.

Miyazu is also in talks with Edaran Tan Chong Motor Sdn Bhd, distributor of Nissan vehicles in Malaysia, to supply stamping parts to its franchise holder and Nissan vehicles assembler in the country.

Miyazu, established in 2003, has a paid-up capital of RM17.5 million. It is 51%-owned by Proton, 34% by Miyazu Seisakusho (Japan) and 15% by Sojitz Corporation.

13-09-2007: VW aims to take 20% stake in Proton

FRANKFURT: Volkswagen AG (VW) wants to take a 20% stake in carmaker Proton and could increase its share to a majority, a person familiar with the situation said yesterday.

Wolfsburg-based VW, the world’s fourth-largest carmaker, plans to propose the move to the Malaysian government, the source told Reuters at the Frankfurt International Motor Show yesterday.

The idea is for the Malaysian government to gradually pull out while taking on any losses during the starting phase, the source said, adding that the VW stake could be increased to 50% within five years.

The German carmaker has long been interested in strengthening its position in Southeast Asia. Last week, it said it had arranged high-level talks in the coming weeks on further steps towards linking up with Proton.

Proton, which faces a shrinking market share in an increasingly competitive domestic market, wants to tie up with a global carmaker to boost its sales and turn itself around.

It expects to return to profit this financial year, helped by the launch of a new car that will replace its most successful model, the 14-year-old Wira sedan.

Proton, set up in 1983 by former prime minister Tun Dr Mahathir Mohamad, at one point sold more than half of all new cars in Malaysia.

But since barriers to competition started coming down, Proton has lost market share, not just to international rivals but also to domestic carmaker Perodua.

Last November, the government announced it had decided to consider giving approval for VW to take a controlling stake in Proton’s manufacturing operations.

The Malaysian government has also held talks with VW rivals PSA Peugeot Citroen of France and General Motors of the United States.

07-09-2007: Proton to continue reducing dealer network

SHAH ALAM: Proton Holdings Bhd, in a move to boost earnings, plans to slash its current 310-dealer network to as low as 200 by end-2008, and introduce new models besides targeting higher exports to high-growth emerging markets like China and Indonesia.

The national carmaker is now taking these measures to arrest declining earnings, realign some of its offerings to target the broader market segment and drop dealers that failed to perform after having lost significant market share in recent years.

Speaking to reporters after its AGM yesterday, Proton managing director Datuk Syed Zainal Abidin Mohamed Tahir said the distribution rationalisation would include identifying areas with oversized dealer network.

“When we first started last year, there were about 400 outlets, both between EON and EDAR. Today we stand about 310 but it is not the right size yet.

“We will continue with our rationalisation, and in fact, we want each and every one of our dealers to perform. Subject to their performance we will manage them properly and if they perform they will be with us. If not, they have to give up,” he said.

Syed Zainal said the national carmaker was also realigning itself to introduce products of mass appeal to capture loss ground, adding that its latest model Persona and the planned Iswara replacement model slated to hit the market next January were for the broader market segment.

“Going forward, we will be very mindful about product positioning, and we will try to produce models of various derivatives on selective platforms. We want to have more carry-over from existing components.

Proton chairman Datuk Mohammed Azlan Hashim said the growth of the company hinged on higher revenue from its domestic and international sales, adding that the encouraging bookings for the Persona as well as the deal to supply 30,000 units of Gen2 CBU cars to China were an early indication of the revival of Proton’s flagging fortunes.

“With 13,500 bookings and 1,200 registrations for the Persona in less than a month after its launch last month, the Persona is shaping out to be a positive addition to our product portfolio.

“In China, production for the Gen2 to be sold under the brand name Europestar will start next month for 500 units and sales are expected to commence in December. Although the total number of cars under this deal is modest, this is a massive achievement for Proton as it represents our single largest export order ever,” he said.

Azlan said there was immense potential for Proton vehicles to notch higher sales in Indonesia, and a better prospect of penetrating the Thai market, especially with the recent relaxation of import duties there.

On the ongoing negotiations with German carmaker Volkswagen AG to form a strategic alliance, he said: “At this juncture, there are no facts and figures available to be confirmed. Clearly, we will work very closely with the government and the parties involved.

“We want to be involved comprehensively because we expect to achieve benefits and reap values that include access to product range, access to market and access to technology.”

On Proton’s move to reduce its dealers, Proton Edar Dealers’ Association president Wan Ahmad Sepwan said: “If Proton car sales volume in total per month is 14,000 units, there should not be any issue with 310 dealers. However sales over the last year have been very low, but last month it was an encouraging 12,000 units, especially with the Persona model coming along.

“It would be ideal to have 250 dealers, as it would mean you have the best performers and they in turn receive good returns for their efforts.”

30-08-2007: Proton to report sharply lower losses in FY08

PROTON Holdings Bhd, which reported a net loss of RM47 million for the first quarter (1Q) ended June 30, 2007, is expected to report sharply lower losses in FY08, says Aseambankers Equity Research.

The research house said yesterday Proton’s 1Q net losses were largely in line with consensus forecasts, although losses were moderated by cost savings.

However, it was more positive for FY08 due to slightly better sales led by new model Persona launched on Aug 15 as well as proactive export initiatives (completely knocked down (CKD) agreement to supply China’s Jinhua Youngman Automobile).

“To date, we understand that over 8,000 units of Persona have been booked, a respectable figure which equals the success of Perodua’s Viva (the Viva also garnered bookings of 8,000 units during its launch).

“Nevertheless, we do not expect Proton’s market share to improve significantly from 29% presently, due to stiff competition and potential cannibalisation of older models (Waja, Iswara),” Aseambankers Research said.

The research house said the shares may have bottomed out, but unlikely to be re-rated in the near term without the crucial catalysts of a strategic tie-up or reversal of steep losses.

It added Proton was unlikely to rope in a strategic partner until after the general election, referring to recent media reports that the government again extended the deadline for a strategic tie-up with Volkswagen (VW) to year-end.

Proton was removed as a Kuala Lumpur Syariah Index constituent stock in May 2007, which blocks share price support from syariah-compliant funds (including government-related funds) should the share price ease.

Aseambankers Research maintained its RM5.80 target price based on a 35% discount to FY08 net tangible asset per share.

Meanwhile, CIMB Research said Proton’s 1QFY3/08 annualised net loss of RM186.8 million was better than its full-year loss estimate of RM356.2 million and consensus loss estimate of RM239.7 million.

This was partly due to an insurance claim receivable and duties overprovided, and a better-than-expected operating margin, it said.

CIMB Research said 1Q revenue fell 19.5% on-year as sales volume dropped 15.6%, dragged down by low trade-in values and more stringent credit screening. Proton’s newer models like the Gen.2 and Savvy failed to draw buyers and have been heading downhill over the past six months.

Although core net loss fell only marginally on-year, it was reduced by 11% on a quarterly basis. This, we believe, resulted from Proton’s continuous cost-down efforts,” it added.

However, in light of the better-than-expected sales of the Persona, it had nudged its FY08-10 sales volume assumptions 2% to 3% higher, leading to 6% and 12% cuts in its net loss projections.

“We continue to believe that Proton will not be able to fend for itself without a foreign partner. Talks with VW have been dragged on for far too long and we believe that even if they pan out, the terms are unlikely to favour Proton,” it said.

The research house retained its “underperform” recommendation and RM4.52 target price, which was pegged to an unchanged CY07 NTA of 0.5 times.

Potential derating catalysts include the slow pace of negotiations and a possible unfavourable conclusion to the talk, it added.